Perhaps the most significant advantage of using private investor home loans is to get the approval and the money quickly. When you need to move on a foreclosed or auction property, you cannot wait for the month-and-a-half to two months for conventional lending to be approved.
Private investor home loans are usually easier to qualify for than a conventional loan. Private investors are not as interested in your credit score or whether or not you have a regular income. Many real estate investors, like “fix-and-flip” contractors, do not have regular incomes. They usually get a lot of money when a house closes, then might have three or four months without a “steady” income until they sell another renovation.
Another benefit of being able to get private investor home loans is when you want a property to build on or a house that doesn’t meet the standard set by the mortgage guarantor, such as VA or FHA. For instance, the VA will not guarantee a loan to buy a property to build on or if the roof needs repair, and there are already two layers of shingles. In these cases, you could borrow the money short-term to buy the property or tear off the roof and put on a new one – problem solved.
These loans are usually six to nine months, though you can usually pay a fee and get it extended if both sides approve. The lender takes upfront fees out of the total lent, and the borrower pays the interest-only payment every month or per an agreed-upon schedule, then there is a balloon payment of the principal at closing.
The property is the collateral, so most private investor home loans are financed with the lender as the first lien holder. With property, this makes sense; no one else can step in and take the house if something happens to the property owner, such as bankruptcy or death. It only makes sense that the person who lent the money to get or improve the property should be paid first or gain possession of the property if the loan cannot be repaid.
Private Investor Home Loans in Houston
Red Door Funding partner with many other investors to make money available to those who need it quickly to buy and renovate depressed properties in the Houston area. Call us on (832) 539-1099.